KUCHING: Pos Malaysia Bhd (Pos Malaysia) is slated to revamp its operating structure with a consolidation of its mail processing centres (MPCs) in addition to revising the wage framework for its employees.
OSK Research Sdn Bhd (OSK Research) believed the potential revision in overall wages of Pos Malaysia’s unionised workforce would have little impact on Pos Malaysia’s bottomline.
It added that the salary revision would take a full year to implement, as prior months’ salaries were likely to be backdated as typically practised by most government agencies and unionised workforces.
A potential 20 per cent hike in salary would only increase staffing cost by 14 per cent for the financial year 2010 (FY10), the research house revealed.
Furthermore, it mentioned the RM623.1 million estimated for FY10 only represented 66 per cent of FY10’s operating expenses that was the same level of last year’s.
The research firm did not expect any increase in workforce following the introduction of the mail-processing centre (MPC) in Shah Alam, as the mail handling process was further automated.
Pos Malaysia’s new automation centre in Shah Alam, which would start operating at the end of FY10, would significantly boost automation of its mail-processing centre from the current 20 per cent to 70 to 80 percent thus improving the pace of mail handling, it stated.
Moreover, OSK Research opined that this would ultimately cut the need for overtime and the consolidation of the existing four mail processing centres in Bukit Raja, Bangi, Seremban and Kuala Lumpur would generate more mail per process and subsequently reduce the number of delivery beats which would in turn enhance its overall bottomline by way of lower transportation costs.
Pos Malaysia had no intention of trimming its workforce other than via natural attrition despite acknowledging that automation would reduce sorting staff by 320 from the current 940, it suggested.
The research firm highlighted that it remained uncertain on where the staff could be deployed for better productivity and this raised some concerns on how staffing redundancy could be minimised once automation kicked in next year.
Although the operating efficiency from the new MPC would only bear fruit in the long run in minimising costs, the higher yields fetched per mail handled come July 1 would significantly boost earnings before interest, tax, depreciation and amortisation (EBITDA) margins from 15 per cent in the financial year 2009 (FY09) and FY10 to 27 per cent by the financial year 2011 (FY11), it reported.
To recap, Pos Malaysia announced that it would revise upwards the tariff on domestic postage on standard mail weighing up to 20 gram and 50 gram from 30 sen to 60 sen and 40 sen to 70 sen respectively, the research house mentioned.
The appended postal tariff would be effective July 1 2010 and would involve several mail categories but Pos Malaysia would introduce Mel Rakyat to address the needs of those who would still prefer to use postal services at a lower price commencing in May 2010.
The review was indeed timely in enhancing the overall welfare of the company’s unionised employees in comparison with other civil servants and unionised labour in other industries, the research firm stated.
It added Malaysia’s postal tariffs on a power purchasing parity (PPP) basis was amongst the lowest in the region prior to the revision yesterday and the nation’s PPP adjusted domestic 20 gram tariff of 13 sen was only half of Indonesia’s 32 sen, the Philippines’ 26 sen and China’s 22 sen.
Pos Malaysia handled a total mailing volume of 1.26 billion in FY09 and it was reported that domestic handling volume had somewhat risen by 10.2 per cent to 1.158 billion mails in 2009 since 2000, the research house mentioned.
It saw the impact of the upcoming postal tariff hike as having an effect on volume as the retail segment had only churned out 116 million to 120 million per annum over the past three years and this represented only nine per cent of Pos Malaysia’s handling volume last year.
Additionally, OSK Research expected a sharp decline in volume in the second half of the financial year 2010 (2HFY10) of 20 per cent when the higher postal tariff came into effect.
FY10 mail volume handled might contract by 11 per cent on a year-to-year (y-o-y) basis and volume handled was expected to decline to 1.023 billion by the financial year 2012 (FY12) from the 1.271 billion in the financial year 2008 (FY08) as non-traditional mail users of postal services resorted to other avenues of delivering mail, the research house said.
It suggested that the high incremental effect on the revision in postal tariff would still be a positive boost to Pos Malaysia’s revenue despite the aforementioned y-o-y decline as yield per mail item handled was expected to improve by a significant 80 per cent from 44.6 sen per mail to 80.5 sen per mail.
In other developments, OSK Research also pointed out that a key jewel that remained unlocked was Pos Malaysia’s 1,013 plots of land banks from the government but Pos Malaysia was constrained by the Postal Land Act which stated the company was only limited to the provision of postal services on these properties.
This limited its growth potential via capitalising on the land bank for property development, the research firm said.
It added that there might be little room for Pos Malaysia to capitalise on its land bank for commercial purposes unless it roped in a strategic partner that could still limit its range of services to those that were related to postal services.
To recap, the Prime Minister announced that Khazanah Nasional Bhd would be selling off its 32 per cent stake in Pos Malaysia through a two-stage divestment process, the research house highlighted.
It added the first stage involved a re-look at its regulatory structure, usage of government-controlled land and the welfare of its staff, which would be subsequently followed by the sale to a potential strategic partner.
Should there be a potential revision in the regulations, this would further scale Pos Malaysia to greater heights by foraying into the property sector by way of inking a joint venture (JV) with a property developer, the research firm pointed out.
OSK Research reported that Pos Malaysia had minimal debt levels that currently stood at RM32.2 million compared with a cash position of RM317.8 million.
The company’s return on equity (ROE) and return on assets (ROA) would expand by double digits at 20.8 per cent and 12.9 per cent respectively by 2011 as earnings gained pace, the research house highlighted.
It pegged Pos Malaysia’s target price at RM3.52 per share.